Kelly McParland: Bank report proves income equality is worse, or better, or maybe in between

Bank report proves income equality is worse, or better, or maybe in between.

This is really confusing.

TD Bank issued a new report on Tuesday, Income and Income Inequality: A Tale of Two Countries, that either said income inequality in Canada is not as big a deal as it’s made out to be, or that it’s significantly worse than the bank expected.

On the “income inequality is a big problem” side is the Financial Post, which notes that “income inequality in Canada has remained steady since 1998 according to the traditional benchmark, but absolute dollar gains by the country’s highest earners have far outstripped the gains by those at the bottom.”

Even though the poorest saw a slightly larger percentage gain in income, absolute gains — the amount of dollars in a person’s pocket — tell a different story, said TD Bank chief economist Craig Alexander.
“Although the traditional benchmark of income inequality isn’t showing an increase, the absolute levels of income matter enormously,” he said.
After a 20% increase, the after-inflation level of income of those in the bottom 20% increased to only $15,200 in 2010 from $12,700 in 1998.
Meanwhile, at the high end of the income scale, the top 20% have seen an 18% increase in income since 1998, but that translates into $26,700 to bring their income to $171,900.
“So part of the issue around income inequality is the fact that households at the low end of the income scale have extremely low absolute levels of income and that’s a major challenge,” Alexander said.
And he points out, those in the middle of the range have seen the slowest pace of increases as the downward pressure on jobs and wages in the manufacturing sector has weighed on growth.

Alright, now here’s the Toronto Star’s take. You’d expect The Star to jump on a report like this, right? The Occupy movement was right, and all that? The 1% continue to stick their jackboots in the poor etc?

Instead, The Star seems more impressed that the gap hasn’t changed that much, and Canadians are doing better than Americans.

The gap between rich and poor in Canada hasn’t changed in more than two decades, a new report says. Those findings surprised even its authors, a group of economists at TD Bank, given the growing public outcry over income inequality.
“We were very surprised to discover that according to the benchmark used for measuring income inequality there hasn’t been an increase since 1998,” TD chief economist Craig Alexander said in an interview Tuesday.
“So, the natural question is, if we have all these increasing concerns about income inequality, why isn’t the traditional benchmark showing it?”
The report, Income and Income Inequality: A Tale of Two Countries, found income inequality is worse in the U.S. than in Canada and has been rising faster since 1998.
Indeed, after lagging behind the U.S. for years, median household incomes in Canada were 10 per cent higher than in the U.S. — at $55,000 a year — by 2011, the report found. (Median means half of households earned more and half earned less. It’s a more accurate measure than average because it eliminates the extreme highs and lows.)
For most of the past two decades, there has been a sizeable gap in median incomes between Canadian and U.S. families. At its peak in 1998, U.S. income was 10 per cent higher than in Canada.
Since then, U.S. incomes have suffered in the wake of two recessions, including the “devastating impact” of the 2008 financial crisis, and have declined fairly steadily to a 16-year low in 2011.
Meanwhile, the solid pace of household income growth here since 1997 had created that Canadian income advantage by 2010.

The Star does eventually get around to the gap still existing, but still doesn’t give it the usual Star populist hysteria treatment. Instead it quotes Alexander poo-pooing it.

“I’m not saying we don’t have income inequality in Canada and that inequality isn’t a problem. What I’m saying is income inequality surprisingly — it was an absolutely stunner to me that in actual fact — since 1998 hasn’t risen,” he said in an interview.

Of course, the reality is that both views are probably right. It just depends on your perspective. Which is what keeps pundits employed.

In the wake of a Grammy Awards ceremony that disappointed many, from Kanye West to the masses on Twitter lamenting the state of pop music, a historical perspective is key. Few are better poised to offer one than Andy Kim.